Adjudication for Low Value Disputes

There is clear evidence in the construction industry of demand for a fresh approach to using adjudication as a method for resolving disputes. This is largely a reaction to the increasing complexity of adjudication procedures and higher levels of fees being charged by adjudicators, mainly because of an escalation in the time they need to spend on evidential and procedural problems.

What about small businesses?

Statistically, adjudication is a popular process. RICS, for example, nominated around 1100 adjudicators in 2018. Since 2009, RICS has reported year on year increases in the number of nominations it has made. But there are close to 300,000 construction businesses operating in UK, many of which are SMEs that do not use adjudication. Lots of smaller businesses appear to be disillusioned with the way adjudication has developed into a process that is often inordinately complicated and expensive. Some even say that adjudication is no longer fit for purpose.

When it was first introduced in the UK in 1998, adjudication was intended to be a quick and effective process. It was said at the time that it was designed to deal with “bite size chunk” disputes. The process has inevitably evolved over the past 20 years. The range and complexity of disputes referred to adjudication these days encompass almost anything that might go wrong on a construction project, regardless of sums of money involved or the intricacy of issues. Lawyers and experts have got involved and the costs have increased. Some adjudicators currently appear to struggle to maintain control of the process and timetable. As a result, they can spend lots more time on an adjudication, and their fees escalate.

Increasing concerns over cost and complexity of adjudication

It appears the Department for Business, Energy & Industrial Strategy (BEIS), is alert to concerns about increasing costs and complexity in adjudication. BEIS has been investigating the extent of real and potential problems for SME’s who say they cannot afford to adjudicate. They would appear to be particularly keen to understand precisely where, in the adjudication process, costs are prone to escalate. They want to identify if it is being driven by overzealous or superfluous lawyer/professional representatives. Are adjudicators at fault for failing to manage the process and timetable efficiently? Are parties at fault by insisting on submitting vast quantities of pointless documents or failing to adhere to prescriptive timetables and then seeking extensions to the timetable?

How to re-establish industry confidence in adjudication

Whether, and if so to what extent, BEIS intervenes in the future to make adjudication more accessible for SME’s involved in lower value claims remains to be seen. It appears BEIS does welcome an industry initiative, supported by RICS, to develop a simple, Construction Act compliant, adjudication timetable and procedure for low value disputes. The aim of the initiative is to re-establish industry confidence in adjudication as a method for deciding straightforward, low value, disputes.

The Low Value Adjudication procedure (LVA) will be Construction Act compliant and offer a more nimble and cost-effective way to settle disputes, and allow small businesses to achieve fair, cost effective and transparent decisions on their disputes. This will be achieved by giving parties the option to adhere to a simple timetable and procedure, setting limits on amounts of evidence to be submitted and providing clarity on how much it will cost.

The process will be aimed at disputes where claims are for less than £50,000, and the issues in dispute are relatively uncomplicated. Where a claim does not meet the criteria for LVA parties will be able to jointly agree to follow the prescribed process and reach agreement on an appropriate fee with their adjudicator.

What next?

RICS realises the importance of giving people access to dispute resolution where they may not currently be able to afford it and is incorporating this issue into its thought leadership programme. As part of this initiative, RICS will call together a forum of key influencers and decision makers drawn from government and industry to discuss how we can push this agenda forward.

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